Salon finds way to blame corporations for inflation

March 18, 2022

By Tim Worstall

Salon wants us to know that the rise in inflation is all because corporations have become more greedy. CEOs have even proven that in the source Salon uses – transcripts of investor calls. There’re two logical problems here.

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The first mistake is the source: those investor calls. This is when the CEO answers question from investors. So, in a time of inflation, an investor might ask, “So, can you deal with inflation?”

“Sure, sure, we can raise prices to deal with inflation,” they might respond. Salon is taking reassurance from a CEO to an investor as being proof that it’s the CEO causing the inflation.

The second error in that logic is that if CEOs had this power all along then why weren’t they using it already? It’s a standard assumption that corporations are profit maximizing, therefore if they could raise prices then they already would have done. Unless the claim is that CEOs – and/or corporations – have just recently suffered an outbreak of even more greed then their only exercising this power right now is something of a puzzle.

Unless, of course, the definition of inflation is that it gives CEOs the room to express that innate desire to raise prices. This could even be true if certain economists are to be believed. But the point of that explanation is still that inflation isn’t the result of CEOs, it’s the result of that other thing that allows it.

Salon ranks within the top 100 news sites for law and government and gains some 7 million pageviews a month from that position. Within progressive circles, it’s significantly more influential than that position would indicate.

Salon might well do its readers a favor by employing a little more care with its economic analyses. Even if we accept – for the point of argument you understand, for we don’t in fact do so – that inflation is caused by CEOs raising prices we still need to understand one of two more things. Either, why have they just started behaving this way or, what newly allows them to do so? And if it’s something in the outside economy that allows it then that’s the cause of the inflation, isn’t it?


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